I Sold My Company on the Internet
What have you put in a Web shopping cart lately? A few books or CDs? Office supplies? A winter parka, maybe? If you visit MergerNetwork.com (w ww.mergernetwork.com), you can drop a $100 million business in your cart, with the click of a mouse.
Well, not quite. What shoppers do instead at this digital mar-ketplace is buy the contact information for companies for sale; leads cost anywhere from $10 to $40 a company. Or, they can purchase an annual subscription to the site for $500 and grab all the leads they want. If, on the other hand, a user has a business to sell, he can list it on MergerNetwork.com for free.
This Web infomediary doesn't frighten Wall Street, explains president and COO Bill Brock, because the companies it lists are too small to attract the Street's attention. The companies aren't just mom-and- pops, though; many range in size from $5 million in sales to $200 million, says Brock.
A division of Cambridge, Mass.-based DealStream Inc., MergerNetwork.com is one of a handful of Web sites devoted to buying and selling businesses. But Brock claims his site generally lists larger companies than the competition does. "We want to become the main clearinghouse for midmarket M&A activity," he says.
In January, the site had about 5,100 companies listed for sale and was adding between 400 and 500 a week. About 80 percent are U.S. companies, with the rest from Europe, Asia, and South America. The site receives between 75,000 and 90,000 unique visits per month, says Brock.
Recently, the site's featured listings included two companies with annual sales between $50 million and $100 million. One was a plumbing and heating supply company in the Midwest, the other was a Southern manufacturer of private- label jeans. Companies are listed anonymously, since most are privately held.
In the past two years, about 250 deals, cumulatively worth about $3 billion, have been made through MergerNetwork.com, according to Brock. He says that when a company is listed for sale, "we'll probably get 30 to 50 qualified buyers in the first two weeks." Users can browse through companies by type of business, size, location, and so on. But the site also offers a "smart agent" that lets a user define his acquisition criteria, then searches the listings for matches. When a prospect is found, the user is notified immediately via E-mail or fax.
Of MergerNetwork.com's 10,000 members, 28 percent are corporate executives. They like to browse: "They use [the site] as a comparison shopping tool," says Brock. "Everybody wants to know what's going on in their industry, all the time." The other 72 percent consist largely of owners, individuals, private equity groups, buyout firms, and brokers and intermediaries. This is one Web site that doesn't cut out the middleman, but instead makes his job a lot easier.
MLS For Businesses
Eric Furlow, a telecommunications company broker in Gulf Breeze, Fla., generated sales of three companies in 1999 through MergerNetwork.com, one a $35 million deal. "I know almost everybody in the paging business," says Furlow. "MergerNetwork.com enables me to contact buyers outside of the industry." Furlow compares the Web site to the Multiple Listing Service for real estate brokers, calling it "the MLS for businesses."
By the Numbers
IT Cost And Investment
|Company size by revenue||Annual average ongoing IT cost||Annual average IT investment|
|<$1 billion||<$43 million||<$9 million|
|$1 bill.$5 bill.||$43 mill.$215 mill.||$9 mill.$43 mill.|
|>$5 billion||>$215 million||>$43 million|
Source: Hackett Benchmarking|Solutions
Average Annual IT Spending
|By enterprise: 2.9% of revenue|
|Per employee: $7,756|
|Per employee: $7,756|
|Highest per employee: $38,676 (Securities sector)|
|Lowest per employee: $459 (Retail restaurants)|
Source: Gartner Group Inc.
BUDGETING AND PLANNING
Planning for the Masses
"E.Planning caught us by surprise," says Roger Colman, manager of corporate services support at Amway Corp., in Ada, Mich. Last year, the $5.7 billion maker of home health and beauty products was looking to automate its planning and budgeting process, which was slow and spreadsheet based. It wanted an enterprise planning system, one that could consolidate financial data across the company. The system had to be flexible and robust, able to accommodate many users with little strain.
Amway was already leaning toward a system from Adaytum Software (www. adaytum.com), whose budgeting and planning systems are noted for their flexibility. Then, last September, Adaytum brought out the beta version of e.Planning, a new system designed to run on Internet- based networks.
For Colman, surprise quickly turned to satisfaction.
"It really kind of fit everything we talked about," he says of e.Planning. For starters, the system integrated seamlessly with Amway's Geac mainframe general ledger and Hyperion consolidation software. Amway also wanted to push budgeting and planning deeper in the organization-- below the manager level, to supervisors and even team leaders. For that it needed a flexible, easily deployed system that would enable operations people to forecast by various units of measure. E.Planning met those criteria, too, says Colman.
Take quality assurance (QA). Before, "we would have simply supplied them with a spreadsheet to input a dollar amount," says Colman. With e.Planning, supervisors in QA can forecast by number of batches tested and cost per batch. "Budgeting becomes more intuitive," Colman says. The Adaytum system "allows accountants who are not IT folks to build templates themselves."
The clincher was e.Planning's Web-based architecture. "We were already looking internally to deploy [budget] input schedules on our intranet," says Colman. Adaytum's new system is hosted on Web servers; on the client PC, only a browser is needed.
"They've done a nice job of providing a thin-client interface," comments Dan Sholler, senior program director at Meta Group, an IT consultancy based in Stamford, Conn. "Certainly, going forward, that is the mechanism most organizations will want to use," he adds.
Thousands Of Users
In theory, e.Planning can accommodate thousands of users, says Adaytum CEO Guy Haddleton. Network bandwidth isn't a problem, he maintains; users work disconnected from the system, once they retrieve the slices of data they need from the server. A calculation engine, downloaded from the system via Web applet, performs units-to- dollars conversions on the user's PC.
"Adaytum's architecture is quite decentralized," notes Meta's Sholler. "An individual sales rep 'checks out' his part of the forecast, then 'checks it back in.'" Individual forecasts are then approved on the system and submitted by budget managers.
"The key value-add is revenue predictability," declares Haddleton, who says e.Planning achieves this to a high degree by combining top-down analytic modeling with bottom-up, high-participation (via Internet) sales forecasting. "Can you manage a 500-person sales force week in and week out [with spreadsheets]? You can't."
Amway could have as many as 500 users on its e.Planning system when budgeting time rolls around in May or June, says Colman. The system is taking its place at the heart of the company's efforts to reengineer the budgeting process, from a lengthy annual event to a quarterly rolling forecast, with monthly updates.
Another business that intends to use e.Planning to help reengineer budgeting and forecasting is Shoreview, Minn.- based Deluxe Corp., a holding company whose units sell paper checks and electronic payment systems, among other products. The $1.3 billion company had installed an Adaytum Planning system in 1997, and it began upgrading to e.Planning last December, says CFO Tom Kelly. The new software will pull data for the company's 600 cost centers from Deluxe's SAP system.
Like Amway, Deluxe is moving to a quarterly rolling-forecast model, says Kelly, and is counting on high input from its sales force to make the model as accurate as possible. "Our intent is to get up to 1,000 users on the system," he says, including 300 salespeople.
Version 1.0 of e.Planning officially shipped December 31. At press time, Adaytum had signed up 20 customers for the product, says Haddleton, shipping 17,500 seats.
VENDOR Adaytum Software, Minneapolis, www.ada ytum.com
PRODUCT Adaytum e.Planning
DESCRIPTION Planning, budgeting, and forecasting software for Internet-based networks
MODULES Three: Analyst, Contributor, Administrator
KEY SYSTEM REQUIREMENTS S
Server: Windows NT 4.0, Microsoft SQL Server 7.0;
Client: Web browser, Pentium- class PC, Windows 95/98/NT 4.0/2000
STARTING PRICE $50,000 for 25 seats
ANNUAL MAINTENANCE FEE 20% of license